More UK businesses are looking at ways to spread tax bills rather than paying a large amount from cash reserves in one go. Industry reports suggest demand for tax funding rose during 2025, as businesses managed higher costs and the timing gap between paying bills and receiving income.
This does not mean borrowing is right for every company. It means that some businesses are comparing options such as using cash, arranging an HMRC Time to Pay plan or taking business tax finance. The right choice depends on your company’s cash-flow forecast, the cost of finance and what repayments it can afford.
In short: why are businesses spreading the cost of tax bills?
- Tax finance demand has risen: Premium Credit reported a 20% increase in the number of companies it helped spread tax bills in 2025, with total lending up 24% year on year.
- Cash-flow timing matters: A company may be profitable but still have a short-term cash gap when VAT is due.
- Finance is one option, not an obligation: Businesses can also use cash, speak to HMRC about Time to Pay or discuss options with their accountant.
- A VAT loan is different from an HMRC payment plan: A lender pays HMRC, while the company repays the lender under the agreed terms.
- VAT Loans arranges finance for UK limited companies only: Funding is subject to lender assessment, affordability and approval.
What is driving interest in tax bill finance?
A tax bill can fall due while a company is also paying wages, suppliers, rent and other operating costs. Customer invoices may not have been paid yet, or income may vary by season. In that situation, a sizeable tax payment can place pressure on working capital – the money available for day-to-day business costs.
Tax costs have also been part of the wider business-finance conversation. For example, changes to employer National Insurance took effect in April 2025. However, there is no single reason for every company to seek tax funding. Each business has its own income patterns, tax liabilities and cash reserves.
Recent reports provide some indication of demand. Premium Credit reported that, in 2025, the number of companies it helped spread VAT, Corporation Tax and Self Assessment bills rose by 20%, with total lending up 24% year on year. These figures relate to that provider’s customers and lending, not every UK business.
Separately, Funding Circle’s full-year 2025 results showed its lending for tax payments rose 29% year on year, reaching around £25 million, with the average tax-related loan size up 13% (SMEWeb). That is another indicator of borrowing activity, not a complete measure of the UK tax-finance market.
Why can a tax bill create a cash-flow gap?
The amount owed to HMRC and the amount available in the bank account do not always move in step. A business may have made sales and incurred VAT liabilities, but be waiting for customers to pay their invoices.
This can be particularly relevant for companies with long payment terms, seasonal income or large supplier costs. A cash-flow forecast can help you identify upcoming liabilities early and estimate what will remain after wages, suppliers and other essential payments.
Before deciding to spread the cost, check:
- When the tax payment is due, using your HMRC account or accountant’s records.
- How much cash the company can safely use without disrupting normal operations.
- Whether expected customer payments will arrive in time.
- How much the company could afford to repay each month.
- The total cost and conditions of any proposed finance.
What options can a UK limited company consider?
Spreading a tax bill can mean different things. Compare the options on the actual amounts and dates involved.
- Use available cash. This avoids borrowing costs, but could leave less money for operating expenses.
- Ask HMRC about Time to Pay. HMRC may agree an affordable payment plan, subject to its assessment. Interest applies to the outstanding balance. Read GOV.UK’s guidance on paying tax in instalments.
- Consider business tax finance. A lender may pay a tax bill, while the company repays the lender under a separate finance agreement.
- Review the timing of income and costs. Your accountant may help you consider invoicing, payment terms and tax reserves as part of broader cash-flow planning.
For overdue VAT, HMRC says late payment interest generally runs from the first day the payment is overdue until it is paid in full. The rate is based on the Bank of England base rate plus 4%. Check the current HMRC guidance, as rates can change. If you know you may not be able to pay, contact HMRC as soon as possible.
How does a VAT loan work?
A VAT loan is a form of short-term business finance intended to help an eligible company pay a VAT bill. It is not a loan from HMRC. The lender pays HMRC directly, and the company repays the lender in line with its finance agreement.
With VAT Loans, finance is available only to UK limited companies. The service offers funding from £5,000 to £15 million, subject to status, affordability and lender approval. The lender’s decision is typically provided within 24 hours once the required information is available. Following approval and signed documents, payment to HMRC is typically made within 24 hours and on or before the 7th of the month, where applicable.
The repayments are set out in the written agreement. VAT Loans’ standard process is three fixed monthly instalments, starting 30 days later. Review the total amount repayable, fees, payment dates and any other terms before accepting finance.
When might spreading a VAT bill suit your company?
VAT finance may suit a company that has a temporary cash-flow timing gap and can afford the repayments. It may also provide an alternative funding line, so you do not necessarily need to use an existing bank facility.
It is not suitable for every situation. If the business cannot afford the repayments, or the cash shortfall is ongoing rather than temporary, taking on more borrowing may not resolve the underlying issue. Discuss your figures with your accountant or existing finance provider if further advice would be helpful.
You can use the VAT loan calculator to get an indicative estimate of repayments. The calculator result is not a formal offer; final terms depend on the lender’s assessment. For another view of the process and eligibility, visit our VAT loans page.
Is VAT Loans a lender, and how can you verify the company?
VAT Loans is a credit broker, not a lender. We introduce businesses to lenders; the lender assesses the application and makes the decision.
VAT Loans is the trading name of Tax Funding Limited, company number 04855916. Tax Funding Limited has FCA reference number 917230 and is an Introducer Appointed Representative of WestWon Limited. You are welcome to verify our details through our company information page and the linked Companies House record.
We have more than 20 years’ experience in the finance sector. If you want to understand how an application works, you can ask us questions before deciding whether to proceed. There is no obligation to accept finance.
Frequently asked questions about spreading tax bills
Are more UK businesses spreading the cost of tax bills?
Industry reports indicate growth in tax-finance activity during 2025. For example, Premium Credit reported a 20% increase in the number of companies it helped spread tax bills. This is provider-specific data, rather than a complete count of UK businesses.
Can I pay my VAT bill in instalments?
You may be able to agree an instalment plan with HMRC, subject to its assessment, or use finance from a lender to pay the bill. These options have different costs and conditions. Compare them before deciding.
Is an HMRC VAT loan provided by HMRC?
No. A VAT loan is finance provided by a lender, not HMRC. If approved, the lender pays HMRC and your company repays the lender under the agreement.
Can any business apply for VAT finance through VAT Loans?
No. VAT finance through VAT Loans is available only to UK limited companies. Applications are subject to lender approval and affordability assessment.
How can I estimate repayments?
Use the VAT loan calculator for an indicative estimate. Check the lender’s written quotation for the final repayment schedule, fees and total amount repayable.
Where can you get more information?
If your company is considering ways to spread the cost of a VAT bill, you can review the options without committing to finance. Use our calculator, read our guide to VAT loans and HMRC Time to Pay, or contact VAT Loans if further information would be helpful.
We can explain the process and the information a lender may require. You decide whether to take the next step.